Metals and Mining Industry

Russia is one of the leading producers of mineral in the world. It produces 20% of the total nickel and cobalt and about 5% to 7% of the overall iron ore and coal production of the world. In addition, it is also a major producer of diamonds, platinum group metals, potassium salts, non-ferrous metals, steel, gold, tungsten, tin, bauxite and silicon. Aluminum and other metals in their raw form account for about 65% of the total Russian exports.

Nearly 20,000 mineral deposits have been discovered in Russia and presently over one-third of these are in the development or mining stage. The major regions for production of minerals are the North Caucasus, the Far East region of Russia, East Siberia and the Kola Peninsula.

In the year 2005, the metallurgical sector was alone responsible for 19% of the total industrial production in Russia. Also, it employed 9.3% of the total industrial labor workforce.The Russian economy is recovering after the global economic meltdown. The market conditions have improved and the confidence of investors is already back. The largest iron ore mining company of Russia Metalloinvest may enter a joint London-Moscow listing. Several other mining companies are also considering IPOs.

Coal mines of Russia in the Far East and arctic region are sought after eagerly by foreign investors. ArcelorMittal acquired three coal mines from the Russian company Severstal for $720 million in the year 2008. Hyundai steel has agreed to buy 300,000 tones of coal every year from Russian company Anthracite for a period of 5 years starting from 2010.

The Russian government understands that it needs to introduce more leniencies on its deposit laws as in their current form they are discouraging investors from investing in exploration projects in the country and a dearth of FDI in the prevalent market situation can hamper the growth of the sector. Foreign companies are not allowed to be directly involved in mineral resources development. However, they are allowed to enter into partnerships with domestic companies.

The Russian government is making amendments to its regulations so as to permit foreign capital to finance metals and mining projects in the country. Investment in the metals and mining industry made up for 20% of the overall investment in the economy of Russia. The Ministry of Natural Resources has devised a program regarding exploration of subsoil reserves and production of mineral resources.

It is estimated that the mining sector of Russia would be worth about $236 billion by the year 2014. Thus, it is not surprising that several multinational metals and mining companies are looking at Russia to make an investment.